Agricultural loans are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisci-culture or purchase of land or agricultural tools. Seasonal agricultural operations include routine activities like preparing and ploughing land for sowing, weeding, and transplantation where necessary, buying inputs such as fertilizers, seeds, insecticides etc. and engaging labour for cultivating and harvesting the crops.
In addition purchasing of land, or purchasing of agricultural tools, storage of produce and transport also are included under purview of agricultural loans.
The agricultural policy of the Government of India also envisages substantial credit flow to increase agricultural production and productivity. Banks provide agricultural term loans to farmers for investment purposes and short term loans for production purposes. There is a need to finance farmers for purchasing land not only to expand their activities but also to make existing small and marginal units economically viable, diversify their present activities and to bring fallow lands and waste lands under cultivation.
In India, agriculture has been marked as priority sector because farmers constitute a large part of the population. As such agriculture sector qualifies for priority sector lending at lower interest rates by banks. In India, most of the commercial banks, co-op societies and rural banks provide agricultural loans to farmers.
Agricultural Loan Providers
The interest rates charged for agricultural loans can vary significantly based on the type of loan scheme that is opted for and your choice of lender. That said, the interest rates for agriculture loans start at about 8.80% p.a. In addition to the interest rate, agriculture loan borrowers will also have to pay a one-time processing fee which can range from nil to up to 2% of the loan amount, if not more.
If you are looking to apply for an agriculture loan, it is advisable to research your options online and apply for a loan of your choice by visiting the nearest branch of a lender. When visiting the branch, ensure that you carry the required documentation along with you to quicken the application process.Â
Certain lenders may also give prospective borrowers the option to apply for an agriculture loan online through their official websites. In this case, you will need to navigate to the respective website, click on ‘Apply Now’, enter the required details in the application form, and upload the necessary documents onto the website. Â
Regardless of the channel that you choose, the lender will verify your application and approve it. Once your application gets approved, the loan amount will be disbursed into your account. Â
A number of lenders today, offer a range of agriculture loans for the benefit of their customers. The various purposes for which you can avail an agriculture loan are as follows: Â
The key features and benefits of agriculture loans are as follows: Â
The documents that you may be asked to submit at the time of applying for an agriculture loan are as follows: Â
The eligibility criteria to borrow an agriculture loan will vary based on the type of loan scheme that you opt for. The generalised eligibility criteria, however, are as follows: Â
Yes, banks do extend loans to farmers for purchasing lands. However, banks usually finance purchase of land within a radius of 3 to 5 Kms of their residence or within village boundary.
 2. Can I pre-close my agriculture loan before the completion of the loan tenure?Most lenders will allow you to prepay the outstanding loan balance and pre-close the loan amount before the completion of the loan tenure. However, you may need to pay a pre-closure penalty to the lender.
   3. What are the different stages involved in the process of availing an agriculture loan?The key stages involved in the process of availing an agriculture loan are as follows:
Submission of application form and relevant documents Lender processes the application Loan amount is sanctioned Loan amount gets disbursed into the customer’s savings account
4. How long do lenders take to process agriculture loan applications? ÂThe time required to process your application will vary based on the lender’s terms and conditions. That said, most lenders take around 7 days to process loan applications.
5. Will I need a guarantor to avail an agriculture loan?Yes, most lenders will require you to have a guarantor. Â
6. Can loan be availed for purchase of land?Yes, banks do extend loans to farmers for purchasing lands. However, banks usually finance purchase of land within a radius of 3 to 5 Kms of their residence or within village boundary.
7. Who can apply for such land purchase?Farmers who own less than 2.5 acres of irrigated land or 5 acres of non-irrigated land, i.e-marginal and small farmers-are eligible to buy land by availing a bank loan. Sharecroppers and tenant farmers can also be covered under the scheme.
8. Can loans be availed for purchasing land in the name of women?Yes, it is possible. As per Govt policy women owning land could lead to their empowerment. Hence, purchase of land in women can be financed and preference can be given to women in distress, SHG members and widows etc.
9. What are the other allied activities eligible for agricultural loan?In addition purchasing of land, or purchasing of agricultural tools, storage of produce and transport also are included under purview of agricultural loans.
10. How much agricultural loan can be availed without any security?To encourage institutional borrowing among farmers, banks have relaxed security or collateral for agricultural loans.
As per RBI directive, crop loans till an amount of Rs. 1 lakh require no security. Loans over Rs. 1 lakh may require security as per the lending banks terms and conditions.
Similarly, there is no margin for loans for purchase of land up to Rs 50,000 and amounts higher than this require a margin of 10%. The land is supposed to mortgaged in favour of the Bank and is considered the security.
A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.
India Finance Minister Nirmala Sitharaman announced the second tranche of economic package under Prime Minister Atmanirbhar Abhiyan.
Sitharaman announced that all the farmers who had availed crop loans from banks where the due date to repay the amount was 1 March will get a relief as the Government of India has decided to extend the repayment date to 31 May 2020.
The Government also sanctioned Rs.25 crore loan for 25 Lakh new farmers with Kisan Credit Card under the economic package.
3 crore farmers with agricultural loans of up to Rs.4.22 lakh crore availed the benefit of 3 months loan moratorium.
Necessary support has already been provided by National Bank for Agriculture and Rural Development0 (NABARD) and refinanced Rs.29,500 crore to Cooperative Banks and Regional Rural Bank in March 2020.
The Government also approved 63 lakh loans worth Rs.86,000 crores approved in Agriculture during the period between 1 March 2020 and 30 April 2020.
Working Capital of Rs.67,000 crore has been sanctioned by the Government for procurement of agriculture produce to the State Governments entities since March 2020.
14 May 2020
In the Union Budget 2020, Finance Minister Nirmala Sitharaman announced that the Agriculture credit target will be Rs.15 lakh crore. This recorded a 25% increase from the previous year’s Rs.12 lakh crore making it the highest growth target for loans for Agriculture.
However, this has received criticism from many as this increase in agricultural credit can be negative as various state governments have been announcing loan waivers for various segments. Shakti Pumps and Roto pumps are a good beneficiary for governments initiative to fund 20 lakh farmers for installing solar pumps.
The Tax on Medical Devices and the funds which are sourced from PPP mode, the government will be building more affordable hospitals under the Ayushman Bharat Scheme. These hospitals will be built in 112 districts to help treat and cure the diseases for which treatments are not always available.
Under this scheme, these hospitals will be empanelled positive for various diagnostic companies. Around 2,000 medicines will be included in the Jan Aushadhi Kendra by 2024. Apart from this, the government also proposed to expand the grid infrastructure of Natural gas to 27,000 km from 16,200 km.
4 February 2020
The Odisha government has come up with the Krushak Assistance for Livelihood and Income Augmentation Scheme (KALIA Scheme). The scheme is designed to benefit around 92% of the farmers in Odisha. An amount of Rs.10,180 crore has been earmarked by the government for KALIA in three years. The scheme is expected to offer livelihood, financial support and cultivation support in addition to providing insurance supports to marginal, small and landless farmers. All marginal and small farmers as well as landless agricultural households, landless agricultural labourers, actual cultivators/sharecroppers and vulnerable agricultural households are eligible for KALIA. Small farmers are those who own between 2.5 and 5 acres of arable land, while marginal farmers are considered as those who possess under 2.5 acres of arable land. The benefits offered to cultivators under the KALIA scheme is Rs.25,000 per farm per family over 5 seasons to help them in the purchase of fertilisers, seeds, pesticides, etc. Landless agricultural households can avail financial assistance to the tune of Rs.12,500 for allied activities like small layer poultry units, fishery kits for fishermen, bee-keeping, duckery units, etc.
10 January 2019
According to the State Level Bankers Committee in Gujarat, the agricultural loans have increased to almost 11% in comparison to last year. The loan amount have risen considerably from Rs. 62,081 crores in June last year to an extra addition of around Rs. 7000. Convenor of SLBC Vikramaditya Singh Khichdi said that there is higher chance of rise in the agricultural loans in the last quarter of this year because of the onset of monsoons in July. He also added that with the aid of these loans, the farmers can buy lot of agricultural equipment and other instruments useful in the construction of agriculture infrastructure. This year, Gujarat has seen less rain than before which amounts to about 18% rainfall deficit. But, this has not stopped the farmers to take more loans and cover additional areas as far as sowing of Kharif crops is concerned. The agricultural department revealed that the total area covered has increased from Rs. 85.04 lakh hectare to Rs.86.23 lakh hectare this year.
3 October 2016
Crop loans that are outstanding as on 30th June 2016 will be waived in Tamil Nadu. Chief Minister Jayalalithaa had made the promise to waive these loans during the Assembly Election 2016. A function was held at the Maravankudieruppu Primary Agriculture Cooperative Society. The certificates of the waiver to small and marginal farmers were distributed at the event. Rs.2.20 crore of loans were already waived at the PACS. Farmers who had availed crop loans for short and medium terms stand to benefit. The estimated figure of farmers that will benefit from this waiver is 78,669. The total loan amount including interest that will be waived amounts to around Rs.251 crore.
12 September 2016
In a move that will make it easier for farmers to get crop loans, agriculture minister, Radha Mohan Singh, has instructed banks to take all necessary measures to streamline and simplify the process of loan approval, so that funds can be provided to farmers in a timely manner. He has also urged banks to make the loan availing process Ëœhassle-free by systematizing the documentation process and connecting the mobile banking, Andhra and Jan Dhan. For the current financial year, the government has increased the agricultural credit target from Rs 8.5 lakh crore (2015-2016) to Rs 9 lakh crore. Additionally, farmers can also avail short term loans up to the amount of Rs 3 lakh at a subsidized rate of 7% for a tenure of 1 year. Farmers who repay the loan in a timely manner will be allowed a further subvention of 3 %.
19 July 2016
The Maharashtra state government has effectively scrapped the requirement for obtaining a no objection certificate (NOC) from societies and banks before applying for a fresh crop loan. The move is likely to benefit the larger farmer community in general. Furthermore, the government has done away with stamp duty paid by farmers on mortgage while applying for crop loan. The new schemes have been launched starting from Kelapur Tehsil in Wagda Village from 17th May onwards and more areas will be covered in the coming days. The Bank of Maharashtra and Maharashtra Cooperative Bank have received instruction regarding the same.
20 May 2016
The Odisha Government has decided to disburse Rs. 6,000 crore as cooperative loans to farmers for the kharif season. Cooperation secretary Manoj Ahuja wants farmer members of primary agriculture credit cooperative societies (PACS) to receive timely, adequate and hassle-free credit during the 2016 kharif season. Loan targets will be assigned to commercial and regional rural banks at the state-level bankers committee meeting soon. Targets have also been fixed for each district. Pradhan Mantri Fasal Bima Yojana, a new crop insurance scheme, will also be implemented this year.
18 April 2016
The regional office of the National Bank for Agriculture and Rural Development (NABARD) has officially sanctioned loans worth Rs 8,800 crores in Odisha as state government loans, direct loans and refinance support to banks for the year 2015-2016. A statement released by the regional office, highlighted that Odisha has always been among the biggest beneficiaries of RIDF of NABARD, wherein loans are given to the state government for the setting up and improvement of important and critical rural infrastructure projects such as irrigation, bridges, roads and much more.
12 April 2016
The union budget presented on Wednesday, chiefly underscored 10 main areas of development namely, agriculture, rural sector, youth, healthcare for poor and underprivileged, demonetization, infrastructure, speedy accountability, public services, fiscal management and tax administration. The Finance minister assured that demonetization will have a positive impact on the economy and the lives of people as a whole. Furthermore, it will result in increased GDP. According to the new budget plan, the fund allocation for NABARD will be increased to Rs.40,000 crores. The change in income tax rate will reduce the tax liability of the working population. As per the revised rates, people with annual income between Rs.2.5 to Rs.5 lakh will have to pay only 5% towards income tax.
3 February 2016
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